Water package: Sealing the deal

Months of delicate negotiations and hardball confrontations; of meticulously drafted legislation that was torn up as soon as the ink was dry, only to be rewritten; of interminable hours in closed-door meetings and impromptu hallway huddles.

A potentially monumental step toward easing a water crisis that had been decades in the making was close.

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And yet an incongruous move by ardent environmentalists to kill a decidedly pro-environment bill was threatening to derail the entire package.

"Incredible," a frustrated Senate President Darrell Steinberg muttered to no one in particular from his desk near the back of the state Senate chambers. "Incredible."

Wrestling with California's water system is like working a Rubik's Cube: As soon as a couple of sides are aligned, the others go out of whack.

To reach agreement among the myriad elected officials, geographic regions and special interests on any one aspect of water in the state is an impressive feat.

Earlier this month, elected officials, special interests and Capitol aides assembled a potentially landmark package of solutions designed to overhaul California's crumbling water system.

It will take years to ascertain whether the package of water system reforms will work. But that they were even agreed to -- in an atmosphere suffused with bitter partisanship and decades-old regional rivalries -- is nothing short of a political miracle.

Here's how it happened, based on interviews with legislative and Schwarzenegger administration officials and staff, lobbyists and other interest group representatives, and on reporters' notes taken during the months of negotiations and final days of voting.

The Bee agreed not to identify specific sources in order to provide readers a candid view of how in private meetings they pulled together a deal that will frame the state's water decisions for the next generation.

Prologue to a dealIn recent years, the state's water fight has centered on three issues: building more storage, i.e., dams; restoring the vital but fragile Sacramento-San Joaquin Delta ecosystem; and moving water in the North to the South.

One day in the fall of 2007, state Sen. Darrell Steinberg, D-Sacramento, broached an idea.

What if proposed water projects -- from dams to Delta restoration -- were ranked in terms of their benefit to the public, rather than just pursued piecemeal for those who would pay for the project and get the water from it?

Steinberg's approach would emphasize that all of California had a stake in managing what is a finite resource, and would give everyone a place at the bargaining table.

The idea went nowhere, a casualty of partisan and regional bickering. But Steinberg had planted a seed in the Capitol.

The following year, another seed was planted by a pair of unlikely political allies.

The state's Republican governor, Arnold Schwarzenegger, and its senior Democratic U.S. senator, Dianne Feinstein, decided to try to broker a water plan based on Steinberg's idea.

The two leaders put together a committee of lobbyists, legislative staff and administration officials to draft a package of measures that addressed all of the key issues -- dams, Delta restoration, moving water around -- instead of one piece at a time.

Like Steinberg's first idea, it died a partisan and special- interest death. But also like Steinberg's idea, the Feinstein- Schwarzenegger package approach struck a chord under the Capitol dome, and continued to echo into 2009.

Now or neverAs the new year dawned, California's water problems were multiplying. Drought conditions dragged on, while federal court decisions and bureaucratic mandates cut supplies to Central Valley farmers and the thirsty South.

In addition, the prospect of a lame-duck governor and elections in 2010 added to the political pressure to get something done in 2009.

Steinberg, who had formally become Senate president pro tem in December 2008, vowed to have a water deal in place by the end of the year.

"People do not expect miracle fixes," he said, "but they do expect us to get going."

The state's crippling budget deficit pushed water planning -- and everything else -- to the Capitol's back burners. But behind the scenes, progress was being made.

With the assent of Assembly Speaker Karen Bass, D-Los Angeles, Steinberg put together two bipartisan, bicameral working groups of legislators.

For months, the groups met on Monday and Wednesday evenings in closed-door sessions to hear outside water experts and draft bills.

Outside the Capitol, meanwhile, coalitions of special interests formed and re-formed.

In the past, water deals had been pecked to death by similar disputes among the flocks of disparate interest groups -- sometimes even when they agreed on the basics.

In 2008, for example, a deal that would have provided financing for water storage fell apart when the sides couldn't agree on whether the annual funding would be automatic, or would need to be approved again each year by the Legislature.

This time around, the Latino Water Coalition, a group of Central Valley elected officials, farmers and farmworkers that had been created in part by the Governor's Office, was putting heat on the Legislature's 24 Latino members to support a water package.

At the same time, a split deepened between environmental groups over issues that included the possibility of a canal through or around the Delta.

And politically powerful urban water districts were vying with equally powerful farm interests for position at the bargaining table.

But by October, the number of seats at the table had narrowed to five.

Threats and bluffsIt's a time-proven axiom of California government that legislators rarely produce results without deadlines -- and sometimes not even then.

Despite a frantic post-midnight effort, the Legislature's regular session had concluded Sept. 12 with no water deal.

"We made more progress in the past few months than has been made on water in the past 40 years," Steinberg insisted as the evening ended. "It may take a little longer, but I have every confidence we are almost there."

But lawmakers now lacked a deadline to make a deal. So Schwarzenegger, who had already warned that he would not sign a package of policy bills if it lacked a bond proposal, created his own deadline.

In early October, he threatened to veto all of the 700-plus bills on his desk if a water package wasn't done by Oct. 11, the last day he had to sign or veto bills before they became law without his signature.

The threat irked legislators, particularly Steinberg, who angrily told Schwarzenegger he didn't need a threat to finish work he had started years ago.

But whether as a result of the threat or in spite of it, the governor, Steinberg, Speaker Bass and GOP leaders Sen. Dennis Hollingsworth of Murrieta and Assemblyman Sam Blakeslee of San Luis Obispo began a seven-day marathon of meetings in Schwarzenegger's office complex.

The quintet of elected leaders -- referred to as "the Big Five" -- hammered out a compromise between mammoth water bond proposals by Steinberg and Sen. Dave Cogdill, R-Modesto.

They debated in excruciating detail issues as seemingly minute as whether to use "shall" or "may" in one sentence of a 128-page bill, or the potential legal ramifications of the term "reasonable use."

Negotiations sometimes bogged down over changes Hollingsworth and Blakeslee wanted as a price for putting up the Republican votes needed to pass the bond proposal, which required two-thirds legislative approval.

One example was a GOP desire to "lock in" the powers to be granted a council that would oversee management of the Delta, by spelling them out in the bond proposal.

If approved by voters, they argued, the powers couldn't be changed by the Democratic-dominated Legislature in future years. But Schwarzenegger refused, arguing that maximum flexibility would be needed for solving future water problems.

In an exchange in his cigar tent that occupies the open-air patio in the governor's suite, Schwarzenegger angrily warned that if the demands weren't curbed, he would reverse an earlier pledge and approve the policy portion of the package and dump the bonds.

That, in turn, angered Blakeslee, who got into a heated argument with Susan Kennedy, Schwarzenegger's chief of staff, about the governor's threat to "decouple" the bonds from the policy bills. (It didn't help that Schwarzenegger had also vetoed two of Blakeslee's bills.)

"In Sacramento, whether you're on the right or the left or the center, people need to know that when you shake their hand, you can rely upon their word," Blakeslee told a Bee reporter a few days after the Big Five meetings ended.

About 5 p.m. on Oct. 11, the last day for Schwarzenegger to sign bills, the five reached a tentative deal. It was so tentative, however, that the legislative leaders refused to allow the administration to announce that an accord had been reached, or was even near completion.

Nonetheless, the governor relented on his mass-veto threat, and called a special legislative session to ratify the plan.

Now came the hard part.

Buffalo and helicoptersLegislative leaders figured they had a one-week window near the end of October to work around various vacations and other lawmaker absences and set a vote on the water plan.

In the weeks following the tentative deal reached in Schwarzenegger's office, it became clear that delay beyond the end of 2009 could result in the package falling apart.

Some of the environmental groups (in water-speak shorthand, "enviros") that had backed the plan were having second thoughts, worrying that in his eagerness to close a deal, Steinberg had made too many concessions.

At one point in the Big Five negotiations, Steinberg agreed to language that would limit what could be used as legal evidence that a water district wasn't meeting its conservation goals. When enviros found out and balked, however, the chastened senator was forced to, in the words of one enviro, "put the toothpaste back in the tube."

Representatives of water districts and agricultural interests (dubbed "water buffaloes") were likewise nervous. They feared language in the bills would threaten water and property rights.

Nervous jokes about "water police" in "black helicopters" became prevalent. After the topic was raised at one meeting in the governor's conference room, Kennedy had four remote-controlled toy helicopters flown in. The prank cut the tension but didn't allay the fears.

'It's a circus'

By the late afternoon of Nov. 2, legislative leaders figured they had their water-package ducks in a row -- or as much as they were going to be.

"I'm feeling some momentum here," Steinberg said. "Now's the time to go."

But last-minute amendments to the package created confusion as well as dissent, as evidenced by one harried lobbyist talking on his cell phone in a Capitol hallway.

"I can't tell you where we are on this (bill)," he said into the phone, "because we don't know what's in it ... it's a circus right now."

For example, what was a $9.4 billion bond proposal when it left the Governor's Office had become a $9.99 billion package by the time it reached a hastily called Senate committee hearing.

"Our goal has always been to keep it under $10 billion," Sen. Cogdill explained with a more-or-less straight face.

By midnight, it was clear the package was not going to sail through the two houses.

Several pieces of the five-bill package moved rather easily through the Senate. But a bill to increase penalties for illegal diversion of water and increase the state's enforcement efforts was stalled behind an unlikely roadblock.

Conservative Republicans had joined with four Northern California Democrats in the Senate to stall the measure.

The balking Democrats and other legislators were being lobbied hard both by water agencies that disliked the idea of facing steeper fines for illegal water diversions, and some environmental groups that were pursuing a risky strategy.

Because the bills were "linked" -- meaning if one failed, they all did -- enviros who opposed the package were trying to torpedo it by opposing one of its strongest environmental elements.

The strategy infuriated Steinberg, who alternately cajoled and berated his recalcitrant colleagues. He watched disgustedly as a dozen roll calls came up short of the 21 votes the bill needed.

Shortly after midnight, despite fears the package's fragile support would crumble if the process dragged on, Steinberg and Bass decided to call it an evening and adjourned their houses.

Parsing the porkThe following evening, and well into the next morning, the stalemate on the illegal diversion bill continued, even as other parts of the package moved from the Senate to the Assembly.

Around 2 a.m. on Nov. 4, Steinberg huddled with Kip Lipper, his top water consultant, and Assemblyman Jared Huffman, the San Rafael Democrat who had been the Assembly's point person on the water deal.

Along with Sen. Fran Pavley, D-Agoura Hills, who had authored the diversion bill, they agreed that the only way to move things along was to weaken the measure enough -- in part by removing a provision that called for fines of up to $5,000 a day on water scofflaws -- to attract some Republican votes for both the diversion bill and the bond.

At a 4 a.m. meeting in Huffman's office, the enviros who had supported the package reluctantly agreed to go along with the weaker version and fight for a stronger measure in January. Blakeslee also agreed to the compromise. Republicans put up 15 votes in the Assembly and five in the Senate, and the bill was out.

That left the bond bill.

When it exited the Senate, the bond measure contained $9.98 billion worth of proposed spending on water projects -- and $10 million for a project that had little or nothing to do with water.

The money had been included by Steinberg to help construct a tolerance center in Sacramento that he had been trying to get built for years.

Few in the Capitol knew the earmark was in the bill, until a Bee story revealing it was published on the paper's Web site just after midnight.

The revelation raised a ruckus on the Assembly floor. Assemblyman Roger Niello, R-Fair Oaks, asked with some acidity about the relationship between the state's water system and a tolerance center.

"All I'm trying to do is parse the pork," Niello said.

Embarrassed and exhausted, Steinberg agreed to eradicate the earmark.

But there was still plenty of pork to go around. To lure votes, more than $1 billion in pet projects were added to the bond measure.

There was money for bike trails at Lake Tahoe, interpretive centers in Huntington Beach and agricultural research at California State University campuses. There was money to tear down dams on the Klamath River and build one up in San Diego County.

In the end, the bond proposal set to go before voters next year had swelled to $11.1 billion.

But the deal was done.

Shortly before 6 a.m., Steinberg rose, somewhat unsteadily, to his feet for one last speech.

"The Legislature has accomplished something together that many people believed could not be accomplished," he said. "It proves the process works."